Man Of The House Bringing linens out of the closet turned this retail maverick into a household name.

When the department store muckety-mucks he worked for tolddivisional merchandising manager Bill Stroud to downsize the linendepartment in their stores, he felt a familiar twinge. It was 1979,and it wasn't the first time the geniuses in charge had decidedto think small.

Stroud had already been through the shrinkage process as amerchandiser for the record department. Record store chains hadmoved in and made department store record departments obsolete.When Stroud suggested expanding his department to compete, he wasmet instead with an order to downsize. Eventually, the departmentfolded.

So Stroud moved to sporting goods-with virtually the sameresult. Next came the toy department-relegated to the back burnerand finally the ash heap with the advent of Toys "R"Us.

Now Stroud was in charge of merchandising linens-a departmentstore staple, an indestructible stronghold. Then came the directiveto downsize. "The amount of space being devoted to everydepartment was changing," Stroud explains. "The companystarted building stores where, instead of having 12,000 square feetfor linens, you were going to have to squeeze the department into8,000 square feet. I knew the selection customers expectedwouldn't fit into a department that size."

And Stroud knew from experience that the executives at corporateheadquarters would insist on scaling down the department-even inthe face of competition. That left Stroud with a choice. He couldwait for some upstart to launch a specialty linens store and watchyet another department go down in flames. Or he could join theother side of the battle.

Stroud was 54 years old. He was not desperate to start his ownenterprise, not anxious to revolutionize the retail industry. Hewas, however, sick of compromise. And he knew he had a hotopportunity on his hands. He would build a linens store soexpansive and stylish that department store linen departments wouldseem paltry by comparison. And even though he had noentrepreneurial experience and only limited access to funds, Stroudhad what it took to hobble his mighty, multimillion-dollardepartment store opponents: He was ready to fight. And he was surethey would doggedly, irrationally, as if destined by nature, shrinkaway from the challenge.

Bed Of Roses?

Stroud was right. He and the $174 million company he founded nowsell more linens than the three biggest regional department storescombined wherever the stores go head to head. Though thecompany's presence is strongest in its home state, the City ofIndustry, California-based Strouds Inc. now boasts 57 locations infour states. Plus, plans for a nationwide expansion are beingcarried out with the help of a $37 million public offering made inOctober 1994.

Strouds' success is no mystery. The stores are atriumph-faultless from every angle. Here, bed and bath ensemblesare displayed to show how those striped pillows look with thatdamask comforter. Salespeople know the relative virtues of300-thread-count sheets; they answer questions, offer decoratingadvice and even take special orders. Priced to compete withdepartment store white sales, Strouds merchandise is almost alwaysa bargain-and therefore almost always irresistible.

Behind the well-oiled machinery at every Strouds store are amillion finely tuned systems and strategies designed to keep thecompany running at peak performance. Stroud credits an innovative,dedicated staff with creating the company's complex web ofefficiency. But Stroud also maintains that the firm's formulafor success remains positively simple: "We like to say thatnobody sells better quality linens for less than Strouds," hesays. "Living up to that statement is our constantgoal."

The Story Unfolds

That goal, in fact, hasn't wavered since the day Stroudopened the first Strouds Linen Warehouse in Pasadena, California,in 1979. Compared with the 20,000-square-foot superstores thecompany now favors, the original 4,400-square-foot location washumble. "We used a lot of unfinished wooden shelving and nocarpet," Stroud recalls. "To make the most of our floorspace, we displayed merchandise on wall shelves. All in all, it waspretty bare-bones."

Finances dictated frugality. Although Stroud started with ahealthy half-million dollars-pulled together via a second mortgage,his pension plan and investments from a few friends-his intentionwas to open two stores in rapid succession, first in Pasadena, justnorth of Los Angeles, and a month later in Torrance, to the south."We needed that much money to buy inventory and fixtures fortwo stores," Stroud says. "Our idea was to offer a wideselection, so we couldn't cut back on themerchandise."

Stroud's transition from executive to entrepreneur wentsmoothly, although it required some flexibility. In his new role,Stroud continued to be a decision maker. But his job didn'tstop there. Stroud also found himself having to convince vendors hewas a serious contender.

As a representative of a major department store account, Stroudhad received the royal treatment from vendors. As a start-upentrepreneur, however, he found that attitude changed. "In thevery beginning, he would go in to meet with vendors at theirshowrooms, and they would always give him the last meeting of theday," recalls Jeff Stroud, 34, one of Stroud's sons andthe company's director of merchandising for housewares anddecorative tabletop.

Vendors, in fact, weren't all that happy to do business withStroud at the outset. "Department stores didn't want usselling the same merchandise for less," Jeff explains."They put pressure on our vendors, and a few vendors evenstopped doing business with us temporarily. But we quickly becameso successful that the vendors stood up to the department storesand said, 'We're going to do this anyway.' They lovedStrouds because we were putting in a full assortment that did theirproducts justice, while the department stores were alwaysediting."

Catching On

Indeed, Strouds didn't take long to find its following. Thestores' emphasis on value pricing struck a chord with localshoppers. More important, however, Stroud proved brilliant atresponding to customer demand.

"One of the first things we found was the customer wanted'better' or 'best' quality merchandise-notnecessarily the least expensive 'good' merchandise,"Stroud says. "Price was certainly an issue for our customers,but so was quality. As a result, we decided to upscale ourstores," with higher-end merchandise and expert service.

To no one's surprise, Strouds became a masterpiece ofmerchandising. Among the stores' more important innovations:Using "vignette" displays to sell whole rooms worth oflinens and accessories instead of individual pieces. Thesecoordinated displays were precisely the kind of merchandising ploydepartment stores lacked the space to duplicate. Yet they were thekey to bigger sales. Telling a customer that $52 worth ofaccessories would "finish" a room was helpful. Butshowing the customer how those accessories worked together-thatclinched many a sale.

Customer preferences have shaped even small decisions atStrouds. For instance, instead of organizing towels by brand, as istraditional in most linen departments, Strouds coordinates towelsby color-the way most customers want to shop for them.

Into New Markets

Of course, Strouds hasn't merely evolved. It has also grown.About two years after the first stores opened, the company embarkedon an expansion plan that would take it into the variousneighborhoods and suburbs of Southern California, into the SanFrancisco Bay Area, and finally east to Nevada, Illinois andMinnesota.

Multiple locations have always been Stroud's goal. However,he admits, "Never, in our most aggressive days, did we thinkwe'd have 57 stores." What fostered such growth? Thestores' rampant popularity, a relative lack of competition, andthe firm's ability to adapt to local demand.

Each new neighborhood Strouds has entered is its ownself-contained market. "For example, our Pasadena store tendsto be fairly traditional in its tastes, while our Beverly Centerstore [less than 20 miles away] is more avant-garde," explainsStroud. "We allow our store managers more latitude than otherstores typically do. Most stores have a central buyer for alllocations. We bring in our store managers three times a year tohelp us select merchandise. That system helps us understand theneed for [variation] from one store to another."

The same system keeps Strouds competitive in unfamiliar markets."Many Southern California retailers have trouble translatingtheir concepts to the San Francisco market," Stroud says."We were able to do so successfully," largely because ofthe firm's deliberate responsiveness.

A Change Of Linens

Responsive, too, is the company's founder, who in 17 yearshas seen and overseen plenty of transformation. Stroud sayshe's still adjusting to one recent change, however: turning thejob of CEO over to company veteran Wayne Selness in 1994. Stroudcontinues to act as chairman, providing vision and guidance for thefirm. "My job now is to ensure we have the right managementstaff and to look at the direction the company is taking,"Stroud says. "It's a big switch for me, not being hands-onin operations."

At 70, though, Stroud feels the change is healthy-both for thecompany and for himself. He describes himself as a man whose mainhobby is business. "I like to read and go fly-fishing,"he concedes, "but I've always most enjoyed running thiscompany."

While Stroud may be logging fewer hours these days, hisinfluence on the firm has hardly dwindled. "My father has puta very strong imprint on this company," says Jeff. "Hisideas and principles are very much alive in the people who workhere."

Case in point: Jeff's recent spearheading of an experimentalnew kitchenware department. Under Jeff's direction, a fewstores have begun selling dinnerware, cookware, cutlery and relateditems. "Throughout the company's history, we've takenthe approach of selling whole rooms-bedrooms instead of bedspreads,bathrooms and not just towels. The only exception has been thekitchen and dining room, where we've sold only tablelinens," explains Jeff.

If successful, the new department will put Strouds on a wholenew playing field. And while Jeff is enthusiastic about thatprospect, he's also suitably awed by his father'sprecedent. "Seeing what a great job we do with linens,it's a real challenge to create a kitchen department that livesup to those standards," he says. "My father built thiscompany on the idea that if we were going to get into a business,we had to do it in a meaningful, competitive way. That rule is asindelible today as ever."

More Than A Sham

Back in 1979, Bill Stroud wouldn't have told you he'dend up heading a giant chain of stores or that the average size ofa new store would hit 20,000 square feet. He didn't know hiscompany stock would be traded on the NASDAQ exchange or thathe'd have employees as far away as Chicago and Minneapolis.

He knew one thing, though. As he pulled up to the loading docknext to a giant department store truck and loaded his ownmerchandise into a modest little van, he vowed that somedayhe'd have a truck as big as anyone else's. That day hascertainly come. Now it's not just that Bill Stroud's truckscan pull up right next to the big guys'-it's that histrucks are the ones to look out for.

Birth Date: July 2, 1925

Residence: Arcadia, California

Marital Status: Married to Joyce for 42 years

Children: Kathy Martin, 40; Steve Stroud, 39; JeffStroud, 34

Family Involved in Business: Joyce Stroud (wife), companysecretary and vice president;

Jeff Stroud (son), director of merchandising for housewares anddecorative tabletop;

Jean Stroud (daughter-in-law), assistant buyer for decorativeand kitchen accessories.

Business Philosophy: "I hope every [Entrepreneur]reader gets a chance to start his or her own business. It makeslife more interesting, gives you a broader perspective. And, bestof all, you get to do things the way they need to bedone."

Contact Source

Strouds Inc., 780 S. Nogales St., City of Industry, CA91748, (818)912-2866.